PLSA comments on Government's productive finance plans | Pensions and Lifetime Savings Association

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PLSA comments on Government's productive finance plans

05 August 2021

The Pensions and Lifetime Savings Association (PLSA) has commented on the Government’s call to the pension industry to challenge organisations to come forward with commitments to invest in long-term, growth enabling assets in the UK.

Richard Butcher, Chair, PLSA, said:
“We support the Government’s ambition to ensure pension funds have the opportunity to invest in the widest range of assets to deliver good outcomes for savers.

“In an era, which has been characterised by low yields and low scheme member contributions, the PLSA and the wider pensions industry have consistently asked for steps to be taken by government and regulators to remove barriers and improve schemes’ access to a broad range of alternative investments, which may suit a pension scheme’s long-term approach.

“As the nation looks to Build Back Better, and accelerate the Green Industrial Revolution the Government can play an important role in providing a pipeline of attractive investible opportunities and a regulatory environment that provides institutional investors with access to high quality, value for money products.

“Supporting innovation through measures such as the introduction of Green Gilts and the Long-term Asset Fund, will also play an important role in facilitating capital investment in long-term infrastructure.
“If they can succeed at this there is a real opportunity for a win-win here: an alignment of the national interest with the interest of pension fund savers.

“It is important to recognise, though, that the UK pensions sector, which looks after over £2trn of assets on behalf of tens of millions of savers is not homogenous. Each fund will, by law, have its own prudently managed well diversified investment strategy and an approach designed to suit its members particular needs. Above all else, trustees’ primary duty is to look after the saver first.

“It is therefore welcome to also see the Prime Minister and Chancellor acknowledge there is no single ‘right answer’ when it comes to how much pension fund trustees should invest in long term UK assets.

“As long-term owners of capital, pension funds are well-placed to reap the benefits of investing on behalf of savers for the long term and should continue to seek to build portfolios of assets which provide stable cash flows and diversification benefits for the next 15 or even 50 years. This is the case for both for the growing defined contribution (DC) market, as auto-enrolment brings in a younger cohort, and millions of savers, but also for larger, more mature defined benefit (DB) schemes, which will be paying benefits for decades to come.

“The evidence suggests that regardless of size, type or maturity of scheme diversification of investments is well- established as common practice with schemes investing across all asset classes, geographies and a range of risk profiles. It does however remain the case currently that investing in illiquid and alternative assets can often be more complicated, more costly and more resource intensive. Where this is the case, such investments are rightly much less compelling value for money than alternative options, irrespective of their potential upsides.

“As part of the Productive Finance Working Group, we and others, have been in discussion with Government about overcoming the structural and practical hurdles, so as to improve the availability and so broaden the range of investible products available to trustees We look forward to continuing to work with the Government on this over the summer.”

Mark Smith, Senior PR Manager
020 7601 1726 | [email protected]

Steven Kennedy, Senior PR Manager
020 7601 1737 | 07713 073024 | [email protected]